How do I create decals w/trans from PhotShop

[sf1857]

I need to create files in AI 9.0 that can be printed as decals for helmets. I am a Photoshop person, new to AI.
The files originate in PS 5.5.
I need to
1) create transparencies - can I do it on a layer basis?
2) create outlines for trimming in the printing process.
I've imported from PS as objects but have not had luck applying transparency to a single layer.

After that, do I need to do anything related to CMYK, flattening, etc

Any suggestion of articles, etc would be appreciated.

Thanks